213 Years Of Sovereign Yields And Defaults

As Jim Grant recently recently noted, America's default is inevitable, as he confronts the implied message of the Federal Reserve’s pro-inflation policy: We will default in the future, though no lawyer will call it “default.” However, a glance back at the last 213 years of global history shows it is not that unusual for major sovereign nations to rapidly crumble and enter a state of default. As Global Financial Data's Ralph Dillon points out, all of this fear and rhetoric over a US default had him thinking about history and defaults. How have other countries that have defaulted faired over history? Some good and some bad for sure, but for the developed markets and global economic powerhouses, those that did default are still here alive and kicking. In fact, some have defaulted 8 times and are still a major player on the world stage.

Via Global Financial Data's Ralph Dillon,

With a couple days to Armageddon, it appears that we will be going right down to the wire once again for yet another politically generated debt crisis. More nonsense and political posturing from our elected officials has had a dramatic effect on the equity and bond markets and its movements. With every talk and whisper, the markets will react and quite possibly, over react.

While default is nothing new for many countries, it is for the United States. Many economists have said that a US default would have catastrophic consequences for the global community. Borrowing costs would essentially sky rocket, global equity prices would be leveled, dollars status as a benchmark questioned and most importantly, a reversal into another deeper and darker world recession.

All of this fear and rhetoric had me thinking about history and defaults. How have other countries that have defaulted faired over history? Some good and some bad for sure, but for the developed markets and global economic powerhouses, those that did default are still here alive and kicking. In fact, some have defaulted 8 times and are still a major player on the world stage.

So the question is, would a default really be that bad for us and is this an opportunity to get our own fiscal issues in order? Should we use a default to wake us up from this debt induced binge? Would it help us to address the bigger issues we face like debt and entitlements? One can only speculate and I guess we shall find out when we cross that bridge. But for the time being, it is being played out on the world stage by our inept and ignorant elected officials who are undoubtedly responsible for getting us into this mess in the first place. Without them, we would not be even talking about a debt crisis.

Here we take a look at historical 10yr bond yields to 1800.

(click image for large legible version)

With it, is a list of countries that have defaulted and when.

1. United States 2013?

2. Germany 1938,1948

3. Japan 1942, 1946-1952

4. France 8 times between 1558-1788. Last one in 1812

5. Italy 1940. Almost daily speculation of another default since 2008

6. Spain 1809, 1820, 1931, 1834, 1851, 1867, 1872, 1882 and 1936-1939. Since 2008, Spanish yields spiked considerably and have been volatile on the back of another default

It's a default on interest payments by the Treasury and since America is now a failed empire, it refuses to except reality - that sh*t ends.

The only thing that can be done (if no agreement is reached), and it's a hollow expectation, is the Fed can fill the gap and pay the Treasury. If that was to happen (the Fed covers all the short term debt), the USD will tank as will ALL markets.

"Aint" is not a word and this is a Strawman arguement because its plainly obvous that by itself not raising the debt ceiling doesn't mean a default. However, by not raising the debt ceiling the treasury will eventually be unable to borrow the money it needs to pay existing interest. Ergo the treasury will eventually default on its debt obligations without a rise in the debt ceiling.

put next to that the depth's of the war's occuring or occuring shortly thereafter and the horror of the casualities in dead, wounded and bankrupted, homeless, seriously quality of life impaired (the last was a cute p.c. term).

Not to switch gears here, but there was once a time when class action lawyers could sue those fuckers and put an end to this kind of bullshit even if the payout to individual consumers was relatively small and the lawyers made a shitload in the process. But those rights have been taken away because "greedy lawyers" were destroying productive companies and tort reform was needed. Good thing, too.

The really nasty SCOTUS ruling from a few months ago relates to arbitration agreements that bar class actions. When you sign up with a CC company, bank, internet provider, or any other Big Corp USA entity now, you unknowingly sign an agreement that you will arbitrate any dispute before industry insiders without the right to aggregate your claims (class action) with other consumers. SCOTUS says it matters not that you had no idea what you were signing in the "agree to terms" click. It will cost you more talk to a lawyer about your case than you can recover, so Big Corp can add endless bullshit charges to your bill without recourse. And there are only a few competitors who all have the same provisions. The public bought it hook, line and sinker.

Yeah, you have to know about it and opt out of the arbitration agreement. Most of those agreements are written way above the average reading level of the average person. How these contracts are conscionable is beyond me. However, arbitration can be very, very expensive for the bank, especially if JAMS is an option. AA is the other big one that can be used for these kinds of disputes. If JAMS is selected by the consumer, it can easily cost the bank a non-recoverable $10k to arbitrate a CC case, and people getting sued have been using this to their advantage. Banks try to squirm out of it any which way they can for most CC cases, as it will actually cost them far more to arbitrate than they will recover. In fact, many have been removing the arbitration clauses from their cardholder agreements becuase of this. The problem is that the older agreements have a survivability clause, and any account that is more than a couple of years old will have an agreement somewhere in the line that has that survivability clause.

It's about who is being sued. What they have done is taken away the consumer's right to challenge BS fees. I provided a link a couple of posts below. You still (for how long?) have decent rights if you are sued.

Sure, but as long as the arbitration fees are prohibitivly expensive for the bank (or whomever,) initiate arbitration over a minor dispute and see how quickly they fold. If they don't fold, you know that the fee schedule for the arbitration forum is not too expensive. IMO, it's more about befuddling people and keeping some of their dirty laundry out of the sunlght than anything else. Take them to small claims and they'll pull the arbitration card, and unless you know the drill, you'll be left dead in the water. The worst arbitration forum (NAF) was fundamentally shut down over a lot of this stuff, because it was found that they were a racket run by the banks. From what I hear, whether or not you get a fair hearing in JAMS or AA simply depends on the luck of the draw.

Not sure what you mean. Filing an arbitration claim requires a several thousand dollar fee from the person who files it. If you are making the claim (my point) to challenge a BS fee, you come out of pocket that amount just to start your case. And you can't sue in small claims court if you signed an arbitration agreement, and if you are dealing with any major corporation for things like a CC or internet, you can't opt out.

There are different fee schedules for corporations and consumers. While I do not know all arbitration forums, JAMS and AA will not cost anywhere near thousands of dollars for a consumer to initiate arbitration, and the company that you have a dispute with will have to pay the bulk of the costs in those forums. The strategy that I mentioned above regarding consumers electing arbitration when being sued by a bank has been very successful when getting the banks to drop the suits because it will cost the bank a lot of money. It did not cost these people a lot, and they were often able to get fee waivers and had to pay nothing. I agree, I don't like the shunning of due process in this way, but it is what it is, and you had better learn how to take adavantage of it because you can bet your ass the other side is doing exactly that.

You can still sue the fucks under the FCRA and the FDCPA and various state laws and win. There are still ways to turn the screws on them, but people very, very rarely do. I've been through the ringer with a large bank and its bad records. They sued me, and they hired the most shyster type of lawyers you could imagine. Each lawyer with the law firm averages several hundered cases per month, if that gives you any idea. Most people are embarrased and cannot hire an attorney to defend them, and are incapable of defending themselves. Most cases are won because the person doesn't even respond to the complaint and summons. I watched one of these guys completely thrash an old grandmother in the courtroom, and it was disgusting. He was acting compassionate while twisting the knife in her gut. The law was clear, and the woman made some statements that completely screwed any chance she had by admitting to the debt, so she lost, but the look of disgust on the judge's face and the look of being completely broken on the woman's face still sticks with me.

The bank used this law firm exclusively in my state for this type of litigation. I went through several court records, and it was pretty clear that not only did the judge that I had really disliked this lawfirm, but that the bank was mass producing affidavits. Then I found a blog written by the very girl that signed mine, and she talked about her job. They way they produce affidavits for litigation is best described as a sweat shop. The scant records that they filed with the lawsuit were internally inconsistant as well. The suit should have never happened, and I'm still confused as to what went on.

To make a long story short, I pounded them with discovery requests and told them that they were going to have to produce every shred of evidence pertaining to the case. They jerked me around, and I pressed on them, and they went running for the hills. Dismissed with prejudice, pro se. Then they came after me again, but now, having gone through that shit, I was able to completely rattle the dogs they sent after me. Now, I'm the plaintiff with both the bank and the lawfirm as defendants. The last of this kind of case that the law firm lost had a fairly large jury award (7 figures,) but it was a different bank that was a co-defendant.

For every single person like me, there are thousands who will just roll over and take it in the ass. We have been conditioned to think that it is good and moral to pay back money that was created by a corrupt bank, and people are ashamed that they cannot. We have been conditioned to believe that banks have good records, when all too often, they do not. Banks pull so much bullshit that they probably could be sued into oblivion, but they won't be.

So, if it ever seems like my hatred of banks is personal, well, it fucking is.

I lurked for a year before I said something, and when I did I got it stuffed up my ass. Those were fun days. This is a kindler gentler ZH, but we need help. You seem to have a particular insight into this topic. It's helpful. Thanks.

Stick around, El Vaquero. I too am in litigation with a couple of sleazy law firms and the sleaziest of banks, BofA, as defendant in their foreclosure suit and plaintiff in my fraud suit. I'm pro se against two different firms and enjoying it greatly.

I inherited my dad's house, complete with horrid Countrywide loan, immediately defaulted. That was four years ago July. Bank sued in March 2010 and I answered, crickets since, though they keep paying the taxes (did I tell you how much I love BofA?) which, in NY state, are quite a load.

So, sued for fraud because the SOL was running out in June of this year, they answered, got a call from attorney who verbally offered "options" and haven't heard from her since.

I could motion for failure to prosecute (1 year in NY) but why bother? The lawyers would have 90 days to come up with reasons for their absence and the judge would probably grant them extensions. I'll wait until we're six years down the road (can't actually believe it's gone on this long) and their SOL runs out. If the case gets dismissed, they may not be able to re-file. Already some cases on the books in NY that say dismissal nullifies tolling, if that's the correct term.

Snippet: "According to the majority ruling, the courts must "rigorously enforce" arbitration agreements in keeping with their terms, even for claims alleging a violation of a federal statute, unless the FAA's mandate has been "overridden by a contrary congressional command." The Court majority found no contrary congressional command that requires rejection of the class-arbitration waiver here. Justice Scalia wrote "[t]he antitrust laws do not guarantee an affordable procedural path to the vindication of every claim," or "evince an intention to preclude a waiver" of class-action procedure. Further, the Court reasoned, the "effective vindication" exemption, which originated in dicta of a 1985 case, only applies when the contract outright denies a remedy – not when it prices it out of reach, because the principle comes from a desire to prevent "prospective waiver of a party's right to pursue statutory remedies."

In a nutshell, if the consumer wants to sue over a $20 charge, they have to pay a lawyer thousands of dollars to do it, and bring the action in an industry regulated arbitration forum.

How can he possibly say that default is new to the U.S? The U.S has defaulted plenty of times:

1. Default of 1779. To finance the Revolutionary war, the Continental Congress printed inflationary dollars, paying their creditors only 2.6 cents on the dollar. Hence the old saying “not worth a continental”.
2. Default of 1790. The Continental Congress borrowed $11 Million. The government refused to repay any of this debt.
3. The Greenback Default of 1862. In 1861 Congress created a new currency called the greenback, $60 million worth, redeemable at any time for 4.8 ounces of gold per dollar. But in 1862 the US treasury refused to redeem in gold and issued non-redeemable notes at a 40% discount from original value.
4. The Liberty Bond Default of 1934. To finance WWar I our government sold Liberty Bonds in 1917 @ 4.25% interest payable in gold at $20.67 per ounce. By 1933 our lying government had issued $29 Billion of these bonds but had only $4.2 billion in gold. So Pres. Roosevelt confiscated every citizens’ gold making it a crime to own gold and devalued the bonds 40%.
5. The Default of 1971. After WWar II the US printed dollars backed by gold again @$35 per ounce, but Pres. Nixon had to default on the gold redemption. Congress then went wildly insane, printing money backed only by the “Full Faith & Credit of our Lying Government.” As a result today your dollar is worth only one sixteen hundreds of its 1971 value. That is less than 1cent of an ounce of gold in purchasing power.

It is if you're a bankster...w/a cascade of derivatives tied to and sometimes secured by Treasuries. I could almost feel sorry for them, but then realize they've so thoroughly invited what's headed their way, default or no, it would be practically rude not to let it unfold.

I'd argue the US has defaulted twice in the past hundred years, on June 5, 1933 and again on August 15, 1971. (For the history impaired, FDR took the US off the gold standard in 1933 and Nixon closed the gold convertability window for foreign countries in 1971.) There were of course defaults prior to this as well.

Put yourself in a central bankers shoes that has been steadily accumulating U.S. treasury bonds of all denominations for years. Is QE infinity not a default? Clearly, said central bankers were expecting a realistic interest rate?

If you made a chart of the past 150 years you would see a steady lower left to upper right where even the 29 crash is just a tiny blip.

My view is the past 150 years is an anomoly in contrast to the rest of human civilization. The past 150 years of persistent ecconomic growth is entirely predicated on the past 150 years of crude oil, coal and natural gas production and the technology that consumes it. Modern economists view the past 150 years of persistent economic growth as being attributable to our greater understanding of economics.

You can overlay a chart of energy and technology production for the past 150 years with same chart of past 150 years of persistent economic growth. Clearly the numbers are too large to reasonably expect the past 150 years of persistent economic growth to be extrapolated into the future. The lower left to upper right chart for the past 150 years cannot be extrapolated further into the future yet debt is still bring extrapolated as if it can.

The global pie of resources is for all intents and purposes finite now, the logistics of expansion are problematic to the extent of impossible.

"... it is being played out on the world stage by our inept and ignorant elected officials who are undoubtedly responsible for getting us into this mess in the first place ..."

It is always a disingenuous and superficial view of this problem of runaway debt slavery generating numbers which become debt insanity to BLAME THE POLITICIANS (or, for that matter, to blame the people that elected them), because that IGNORES the real history of how we got into this predicament of financial systems which created debt slavery in the first place. Debt slavery was backed up by wars based on deceits. One has to look a lot harder and deeper to perceive how and why we ended up with APPARENTLY incompetent politicians, who appear to be elected by incompetent voters.

I REPEAT THE BASICS:

There are always at least TWO LEVELS behind every article like this one above:

FIRST, the biggest gangsters, the international banksters, have been able to apply the methods of organized crime to take over almost all the governments in the world, in order to legalize their FRAUD, in the form of privatized "money" made out of nothing, as debts, which necessarily drives itself insane, and inevitably towards default, because of its fundamental structure!

SECOND, most of the controlled opposition to that wants to continue to believe in the same old magical ideas, in the form of false fundamental dichotomies, which motivate the notions that through some series of political miracles, we could finally make impossible ideals be realized, as the "solutions" to our real problems.

The conclusions from facing the real facts are not nice, because the realities are that government IS organized crime, controlled by the best organized gang of criminals, because money is actually measurement backed by murder. Since the debt controls depend on the death controls, there are NO real solutions to the debt slavery becoming debt insanity, other than some different system of death controls, erupting through the madness of a civilization which has become almost totally controlled by huge legalized lies, for so long. Moreover, default of a world-wide reserve currency, that has become global electronic fraud, backed by atomic bombs, is way more difficult and dangerous than any previous sovereign defaults in history!

THE USA, LIKE OTHER COUNTRIES, ARE GOING BROKE BECAUSE THEY HAVE BEEN CONTROLLED BY THE BEST ORGANIZED GANGS OF CRIMINALS. THERE IS NOTHING OUTSIDE OF THAT REAL FRAME OF REFERENCE WHICH CAN PROVIDE REAL RESOLUTIONS TO THEIR PROBLEMS.

However, almost nobody operating within those established systems, including their controlled opposition, is going to ever admit any of those social facts, which is why the whole thing has to continue to push itself through to psychotic breakdowns, as the only possible way the real world develops ...

Usually, as we go deeper into history, it was military issues that drove countries into debt, where it was necessary to truly borrow excessively, in order to struggle to survive. However, that period in time is not relevant now, except as a sort of archeology, to understand how the foundations were laid, long ago, to create the War Kings, and their sovereign states, whose evolution during the past few Centuries had its most important beginning with the chartering of the Bank of England. In the United States, the crucial turning point was in 1913, with the creation of the Federal Reserve Board, and the Income Tax to universally back up that form of money as the enforced legal tender:

What has happened almost everywhere is that the international bankers became the Fraud Kings, who covertly took control over the public money supply, and systematically corrupted the political processes. The real mechanisms which made the present systems were bribery, intimidation, and assassination of some crucial politicians that could not be bribed or intimidated. THAT is the reason why we have apparently incompetent politicians, elected by apparently incompetent citizens. Debt slavery did not happen by accident! It happened because there was a prolonged triumph of the applications of the methods of organized crime to wipe out resistance, and reduce it to being ineffective.

On level after level, it is the wrong analysis to blame the politicians and citizens for being incompetent, without facing the systematic application of deceits, backed by destruction, which selected for those apparently incompetent politicians to become the only successful and surviving politicians, which thereby developed the overall systems which brainwashed people to believe in the biggest bullies' bullshit social stories, by rewarding them when they agreed with that, while punishing them if they disagreed, and would not go along with the more and more publicly accepted views that "2 + 2 = 5."

It SHOULD be elementary common sense that giving away the power to make "money" out of nothing, as debts, to PRIVATE BANKS, was an insane thing for politicians and the public to agree to do. The basic foundation of our current system makes as much sense as "2 + 2 = 5." However, the basic point of the way that that "2 + 2 = 5" arises in the novel 1984 was about how brainwashing works, and thereby destroys people's ability to think rationally, and instead, gets them to agree with absurdities, while all of the more basic human understanding and compassion atrophies away. Politicians and the public were systematically driven to become incompetent by a schedule of reinforcement, through prolonged episodes of being rewarded for agreeing with lies, while being punished for not agreeing.

AFTER the privatized fiat money-as-debt, made out of nothing, frauds got going, the advantages accruing to those who got away with doing that became more and more astronomical in size! There was an automatic feedback of being able to engage in even more bribery, and brainwashing, while the back up systems of intimidation and assassination were still there too. In the world today, any politician that attempts to point out how totally insane the established financial systems really ARE, thereby practically guarantees that their possible political career will be destroyed. They are up against a Century of the school systems and mass media having already indoctrinated and brainwashed most people to not understand, and to not want to understand, how the monetary and taxation systems really work.

The most obvious common sense should tell people that giving away the power to make money out of nothing to private banks, as debts for everyone else, was social INSANITY! However, the situation is actually the opposite. Everyone has to try to make a living within the established systems, where money to most people represents work and sacrifice, so that all those values and cares are totally tangled up within the power of the banksters to make that money out of nothing.

In that context, it did not happen overnight that almost all American politicians, andmost American citizens, were reduced to appearing like incompetent idiots, and Zombie Sheeple. There was a prolonged systematic campaign, which applied the methods of organized crime to create the situation where agreeing with huge legalized lies made one successful, while disagreeing with those lies destroyed one's chances to get ahead within the established systems. It is in that historical context that blaming the puppet politicians, or the masses of muppets, for what the puppet masters deliberately made and maintained, is to miss the radical truth, upon level after level, while substituting a silly and superficial understanding of what the problems really are, and how much deeper they really go!

Something in this whole default/shutdown farce doesn't add up. It's supposedly the 20 or so Tea Party Republicans who are gumming up the works. Least that's what the presstitutes keep repeating. Surely, since the remainder of D & R types are so wanting to get the government open and avoid a default at all costs, should be a slam dunk to get 218 votes from some coalition or other.

The R's passed everything needed for the government to be up and continue running prior to the shutdown. The R's also choose to not fund Obamacare. See the US Constitution as to where their authority comes from to do this.

The Senate and BO stated that unless BOcare is funded too they will shut down the government and possibly default.

After "shutting down the government", the presstitutes, BO and the Dems proceeded to do what they do best: Lie.

The federal gov is like a tiny lever being moved by people in a glass tower - every bill that gets written on paper then results in the lever being moved - but what that means way way down on the ground is wild swings like a wrecking ball - in society, in local gov funding, in our food, our schools, our lives - creating destruction all over the place, requiring readjustments by everybody except for the people who wrote the dang bill to begin with. It is too separated from those who fund it, too powerful, too complex, and too secretive. Until we get back to the limits put in our constitution, there is no place to go but craziness. Too complex = fragile...

Having the dollars to pay the debt isn't a problem as the Fed's profits are based on lending moar money into creation. The words that have been echoed many times, "the full faith and credit of the USA", are the key. And just what is the source of the 'dollar power'? The Petrodollar Arrangement.

Henry Kissinger negotiated the deal whereby the U.S. military complex protects the House of Saud, Saudi Arabia, in exchange for settling all oil trades in dollars.

The House of Rothschild, Isreal, gets to earn interest as the money changer.

There used to at least be this local economy around but easy street has killed any incentive to work. Fascism creeps in as more and more CIA types and/ or lackies come to power. The State directs businesses to protect the State.

Harnessing technology has been wonderful for the State as it means the edge in holding power. Hey, where did we get all those excellent rocket scientists from?

We are well on our way and this little charade on the Hill is irrelevant.

Ironic or what that 'scientists' flee to our enemies.

Oh and Iran, they don't use U.S. Petrodollar (neither does Syria). follow the money... U.S. welfare is just the cost of doing business. don't be misled, it's a rounding error.

The Chinese are building their energy business and that is what will allow them to float a reserve currency. the gold part is historical and once launched will be debased too (they wrote the book don't forget).

Sooooo, the printing will continue and like in Zimbabe the stock market will rise.

The whole point of the petro dollar regime is so we default all the time..."just to them." Worked like a charm in 2008 but I 'm unclear this go around. Interest rates are at all time record lows, energy production is soaring, we've left Hollande out to dry and Puerto Rico is about to be Detroited. "just another day in the life of 'merica!" I'll truly respect the President's decision on Syria...totally command decision..but I think from a "get out of my I'm coming through" point of view it was a mistake. I have no clue what's going on in the House...why do we have total chaos again? Oh yeah, it's the House. Thank God the Senate has this matter all under...oh, wait. I did find it funny that we got put on watch for downgrade by France. "Is that all you got?" came to mind. You can't make this stuff up...and the beauty is you don't have to.

The great irony is that I want America to win but the way we're doing it isn't within my belief system. Further, I don't believe that we are 'winning' for us even. Our mercenary army is for hire. Heck, the sheik basically said that they'll pay us directly to go into Syria.

People are waking up and Syria was a total surprise to TPTB. They're patient though and are working on abolishing free speech. Funny, I am awakening too and have been thinking about buying guns/ arms.

There was a great Henry Ford quote on another thread referencing the fact that if most knew about the banking system there would be a revolution by morning.

i suppose the theory that the Baby Boom was the first to be indoctrinated and more importantly subdued psychologically makes sense.